How Not To Discount: Part I
Don’t discount to your full-price channel too much.
At Goldstar, we believe strongly that when done well, discounting (not just through Goldstar) is highly beneficial for venues. I’m going to talk about several ways you should not discount and why. Here’s the first way you shouldn’t discount, and it’s a doozy.
When you make your full-price buyers the primary target of your discount promotions, you’re making a big mistake. I’m not saying you should never put a discount out to your house list, but it should be fairly low on your list of tactics.
Why is this? Because your house list is most likely made up of your full-price buyers. These are the people who are most likely to put a high value on what you do, even if they haven’t bought yet. Do this thought experiment with me: Imagine you sent an email to your top 1% of customers offering them great seats at a steep discount. How would that email perform? Pretty well, I’m guessing. But if, in a parallel universe, you didn’t send that email, the question is what the average revenue earned for those customers would be in each world? Would you be doing better?
Perhaps, but probably not, and the point is that discounting should not be a strategy just for converting a few quick bucks, but for other, more strategic purposes.
It ticks me off to hear show marketers talk about wanting to avoid appearing to be giving discounts into the marketplace, but at the same time, they’re spamming their own best customers with offers.
Who do you think is more likely to draw conclusions you don’t want them to draw about the desirability of your show: a very engaged patron who gets an email from you with a discount or a mainstream entertainment consumer who’s never heard of you or never really thought of going to your venue who gets an offer from Goldstar or Travelzoo? Our evidence very strongly shows that it’s your own existing fans who might make this conclusion.
There’s a principle I want you to think about, and that is that the best customers should want to give you more and get more from you. Price should be the very last lever you pull with them, because either you’re getting and giving less or you’re giving them a gift. Gifts are nice and can be a good tactic for building good will, but a better long-term strategy is to deepen the relationship by giving more to and getting more from your truly engaged people. Don’t give them the same thing for less. Give them something special that only they can have for more.
A major concert promoter told me that their discounting strategy involves putting a show on sale, waiting to see how sales go and if sales aren’t good, they send out a 25% discount to all the buyers in the region of the show. If sales continue to struggle, they send out a 50% discount to all the buyers in the region.
Can you imagine? They promote a show to the very same people with a very predictable 100%, 75%, 50% progression and are surprised when a) people catch on and b) people begin to feel that the real price of the show is not the first one they see.
If you discount, it’s best to use outside distribution channels like Goldstar or others as a first resort because, if a channel is good and doesn’t just resemble your own channel, you’ll be reaching a new audience with different characteristics. You’re getting the value of promotion in that channel and the yield management benefits of a lower price.
Use your own channel too often and you’re not doing a price promotion with a discount; you’re just doing really bad dynamic pricing.